Pakistan signs deal for establishment of Asian Infrastructure Investment Bank as a founding member

Islamabad, October 24, 2014 (PPI-OT): Pakistan’s Federal Minister of Finance and Revenue Senator Mohammad Ishaq Dar today signed the Memorandum (MoU) Understanding for establishment of the Asian Infrastructure Investment Bank (AIIB) in Beijing as one of the 21 Prospective Founding Member countries. The signing of the MoU signifies that the parties have jointly decided to establishing AIIB that would accelerate the negotiation process of the Articles of Agreement (AoA) for the bank.

Following the signing ceremony Finance Minister Ishaq Dar said that it was a historic and auspicious occasion for Pakistan to be a pioneer and prospective founding member of the much-needed infrastructure investment bank, that would be instrumental, though complementary to other banks in addressing the pressing infrastructure needs and development deficits of the region and beyond.

“The AIIB is a landmark decision and will provide financing support to developing countries in Asia for infrastructure development in order to promote regional connectivity. Pakistan has been supporting the initiative right from the initial announcement. We believe that the bank will be an important platform to convert the abundant savings available in the region into investment to help regional economies achieve sustainable and rapid development thereby contributing to the world economy”.

Minister Ishaq Dar said that in our region the “appetite for infrastructure is much greater than other regions and it is lagging behind” and the creation of the bank would be very helpful in reducing poverty, increasing GDP, per capita income and overall economic growth and socio-economic prosperity of the region. “The region will have greater opportunity to focus on attending to the infrastructural deficits,” he added.

He said that it was imperative, given the dynamics and imperatives of growth in the region, to have a bank to augment and complement their services at hand through other similar banking and financial institutions. He said AIIB would work closely with World Bank, Asian Development Bank and other multilateral and bilateral development institutions in a complementary way to promote regional cooperation and partnership in addressing the development challenges.

He said it was a great win-win initiative of Chinese leadership that received broad support not just from Pakistan but many other countries. Since the beginning of the year, China had led extensive consultations with other regional and non regional countries on establishment of AIIB, he said adding that after several rounds of multilateral consultations, regional Prospective Founding Members had reached consensus on key elements of AIIB as reflected in the MoU.

In October 2013, Chinese President Xi Jinping and Premier Li Keqiang announced the initiative of establishing AIIB during their respective visits to South East Asia, he added. He said the historic signing would bode well for development and would reap many benefits. This would translate into further enhancing of bilateral and economic ties between Pakistan and China.

He said ICBC had opened branches in Pakistan, several energy and communications infrastructure projects including China Pakistan Economic Corridor projects were underway between the two countries and an institution like AIIB can play a pivotal role in materializing these initiatives.

With headquarters in Beijing, AIIB will be an intergovernmental regional development institution and would operate following the model and principle of multilateral development banks, focusing on supporting the infrastructure development in Asian region. The authorized capital of AIIB will be US$ 100 Billion and initial subscribed capital will be US $ 50 billion.

The initial paid up capital will be US$ 10 billion. AIIB will draw upon the best practices of the existing MDBs in setting up its governance structure. The establishment process of AIIB is open and inclusive, and other interested countries are welcome to join the process. It is expected that the AoA will be finalized after rounds of negotiations and likely to be signed in mid 2015 and AIIB will be formally established to start operation by the end of 2015.

The 21 Prospective Members include:-Bangladesh, Brunei Darussalam, Cambodia, China, India, Kazakhstan, Kuwait, Lao PDR, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, Philippines, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan, and Vietnam. Indonesia would be the 22nd Member and has not been able to obtain necessary government approvals for MoU owing to elections in the country. It will join AIIB as the prospective founding member after completion of necessary formalities.